CIBC raises dividend following better-than-expected Q1

TORONTO — The Canadian Imperial Bank of Commerce set the tone for banks’ earnings season with a dividend hike and betterthan-expected first-quarter net income, helped by a boost in earnings in its U.S. division as it looks to expand south of the border amid slowing mortgage growth at home.

Canada’s fifth-largest lender said Thursday it continues to see benefits from the purchase of Chicago-based The PrivateBank, which CIBC acquired in June 2017 and rebranded in September as CIBC Bank USA.

As part of its strategy to ramp up its U.S. presence, it also purchased Chicago-based wealth management firm Geneva Advisors for roughly US$200 million last year.

“With a second full quarter’s contribution from CIBC Bank USA, we continue to perform well and deliver against our commitment to build client relationships north and south of the border,” CIBC chief executive Victor Dodig told analysts on a conference call.

In the latest quarter, CIBC’s U.S. commercial banking and wealth management division reported net income of $134 million in the latest quarter, up $105 million from the same period in 2017, contributing to a more than 22 per cent increase in adjusted net income year-over-year despite slowing mortgage growth.

It’s a welcome sign for the bank, which has a larger domestic exposure than its peers and mortgages — demand for which is expected to slow under new tighter rules — also represent a bigger chunk of its loan book, said Shannon Stemm, an analyst with Edward Jones in St. Louis.

CIBC was the first of Canada’s big lenders to report results for the quarter ended Jan. 31, kicking off the season by raising its quarterly payment to common shareholders by three cents to $1.33 per share — even as it reported a decline in profit attributable to shareholders, which amounted to nearly $1.31 billion, down from $1.39 billion a year ago.

Industry watchers were also eyeing CIBC’s results for early signs of the impact of recent changes to the banking landscape, such as stricter rules surrounding uninsured mortgages as of Jan. 1. Canada’s biggest banks have cautioned that the federal financial services regulator’s revised qualifying rules — requiring would-be homebuyers with a down payment larger than 20 per cent to prove they can continue to service their mortgage if interest rates rise — could present a headwind to loan originations.